Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by it recent monthly contribution format income statement: Sales Variable expenses. Contribution margin Fixed expenses Net operating income (loss) $ 1,567,000 576,590 Sales Variable expenses as a percentage of sales Traceable fixed expenses 990,410 1,089,000 $ (98,590) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly Accounting Department has developed the following information: East $ 397,000 $299,000 47% Division Central $ 650,000 24% $ 336,000 West $ 520,000 45% $ 200,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $22,000 based on the belie it would increase that division's sales by 16%. Assuming these estimates are accurate. how much would the company's net oper

Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses for some time, as shown by it recent monthly contribution format income statement: Sales Variable expenses. Contribution margin Fixed expenses Net operating income (loss) $ 1,567,000 576,590 Sales Variable expenses as a percentage of sales Traceable fixed expenses 990,410 1,089,000 $ (98,590) In an effort to resolve the problem, the company would like to prepare an income statement segmented by division. Accordingly Accounting Department has developed the following information: East $ 397,000 $299,000 47% Division Central $ 650,000 24% $ 336,000 West $ 520,000 45% $ 200,000 Required: 1. Prepare a contribution format income statement segmented by divisions. 2-a. The Marketing Department has proposed increasing the West Division's monthly advertising by $22,000 based on the belie it would increase that division's sales by 16%. Assuming these estimates are accurate. how much would the company's net oper

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Differential Analysis for a Discontinued Product A condensed income statement by product line for Warrick Beverage Inc. indicated the following for Mango Cola for the past year: Sales Cost of goods sold Gross profit Operating expenses Operating loss It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 18% of the operating expenses are fixed. Because Mango Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. $236,700 (108,000) $128,700 (144,000) $(15,300) a. Prepare a differential analysis dated February 29 to determine whether Mango Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Discontinue (Alt. 2) Mango Revenues Costs: Variable cost of goods sold Variable operating expenses Fixed costs Profit (Loss) Cola February 29 Continue…
A manufacturer is considering eliminating a segment because it shows the following $6,100 loss. All $20,300 of its variable costs are avoidable, and $36,700 of its fixed costs are avoidable.
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Decision to Discontinue a Product On the basis of the following data, the general manager of Foremost Footwear Inc. decided to discontinue Children’s Shoes because it reduced income from operations by $10,000. What is the flaw in this decision if it is assumed that fixed costs would not be materially affected by the discontinuance? Foremost Footwear Inc. Product-Line Income Statement For The Year Ended April 30, 20Y7 Children's Shoes Men's Shoes Women's Shoes Total Sales $165,000 $300,000 $500,000 $965,000 Costs of goods sold: _______________ ___________ __________ ____________ Variable cost $105,000 $150,000 $220,000 $475,000 Fixed costs 32,000 60,000 120,000 212,000 Total cost of goods sold $137,000 $210,000 $340,000 $687,000 Gross profit $28,000 $90,000 $160,000 $278,000 Selling and adminstrative expenses: ____________ ____________ ____________ ___________ Variable selling and admin. expenses $21,000 $45,000 $95,000 $161,000 Fixed selling and admin.…
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Marin Company makes several products, including canoes. The company reports a loss from its canoe segment (see below). All its variable costs are avoidable, and $330,000 of its fixed costs are avoidable. Segment Income (Loss) Sales Variable costs Contribution margin Fixed costs Income (loss) $ 1,097, 600 784,000 313,600 376,000 $ (62,400) (a) Compute the income increase or decrease from eliminating this segment. (b) Should the segment be continued or eliminated?
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